Nextel and Sprint combine in $46.5 billion merger-of-equals
Clients Nextel Communications, Inc.
Jones Day advised Nextel Communications, Inc. in its $46.5 billion merger with Sprint Corporation and provided securities law advice to the client. The Nextel/Sprint combination is a true merger-of-equals -- both companies are valued equally and their shareholders each hold approximately 50% of the new company, named Sprint Nextel. Existing Sprint shares remained outstanding and Nextel stockholders received the equivalent of 1.3 Sprint Nextel common shares in a combination of approximately 1.28 shares and $.50 in cash per share. The aggregate amount of the cash payment did not exceed $2.8 billion. The exact cash/stock allocation was set at closing to facilitate the tax-free spinoff of Sprint's local telecom business.
The combined equity value of Sprint and Nextel was approximately $70 billion. The companies and their affiliates and partners have over 40 million wireless subscribers and operate networks covering 262 million people, more of the U.S. population than any other carrier. Sprint Nextel will have a strong position in mobile data and push-to-talk services, two of the fastest-growing areas in telecom in which the companies are leading innovators. Along with M&A representation, Jones Day provided antitrust (with clearance by DOJ after a lengthy and thorough investigation), employee benefits, real estate, and tax advice regarding the transaction.
Jones Day also handled two disputes that arose in connection with the merger. One concerned the right of the Class A shareholders of Nextel Partners, an affiliate of Nextel, to put their shares to Nextel at a fair market value price determined under an appraisal process established in Nextel Partners' charter. Nextel and Nextel Partners were unable to agree on certain procedural and substantive aspects of the appraisal process. Nextel sought a declaratory judgment clarifying the process, and Nextel Partners sought competing definitional clarifications and an acceleration of the put process. The court construed the charter in a way that resolved a procedural ambiguity, refused to accelerate the put process, and decided that the parties' disagreements over how to interpret the phrase "fair market value" in the charter should be resolved by the appraisers. The other dispute arose when Nextel Partners sought to enjoin changes to Nextel's brand following the merger, and to block Sprint Nextel's multimillion dollar rollout of the combined company's new brand. Nextel Partners' claims were based on provisions of its Joint Venture Agreement with Nextel, which Nextel Partners asserted gave it the right to use the precise branding name used by Nextel. Applying New York law, an arbitration panel refused to enter an injunction because Nextel Partners did not demonstrate a likelihood of success on the merits or irreparable harm.
Nextel Communications, Inc. v. Nextel Partners, Inc. (Del. Ch. November 18, 2005); Nextel Partners, Inc. v. Nextel Communications, Inc. (CPR Arbitration Sept. 1, 2005)